First Reserve adds energy equipment manufacturer

Richard Lee

Updated 7:25 pm, Tuesday, December 11, 2012

First Reserve, a Greenwich-based private equity firm focused on the energy industry, expects to close on the acquisition of a Houston manufacturer by the end of this month, expanding its portfolio to nearly 40 businesses around the globe.

Working with Tanglewood Investments of Houston, First Reserve will acquire Ameriforge Group from Post Oak, a Tanglewood affiliate. Terms of the transaction were not disclosed.

Ameriforge makes equipment for oil and gas drilling and the power generation, aerospace, transportation and industrial markets. Its executive management team will remain in place and will retain an equity interest in the company.

Ameriforge, which has 29 facilities in Canada, China and the United States, complements First Reserve's portfolio of 37 other companies around the globe, according to Jeff Quake, managing director of First Reserve, which has raised $23 billion in capital since its inception in 1983.

"We believe Ameriforge's manufacturing capability positions them well to participate in several of our core themes including international sub-sea development, the application of technology to extract unconventional resources and growth in recurring after-market related services," Quake said.

Access to First Reserve's funding and management experience will help Ameriforge expand its operations through purchases or employee hires, according to Chad Watt, head of the energy services subsector for Mergermarket, a trade publication.

"My guess is that it will be a little bit of both," Watt said from his Dallas office. "First Reserve is one of the biggest players in energy private equity. Its fund (XII) has $8.9 billion in capital commitments. The seller (Post Oak) is more of a middle-market private equity shop. Their pockets aren't quite as deep."

But Tanglewood, through Post Oak, transformed Ameriforge from a single flange forging company serving the North American market to a 29-facility international manufacturing enterprise focused on global energy, aerospace and transportation industries, said Gean B. Stalcup, Ameriforge chief executive officer.

"We believe our business model is uniquely poised for continued significant growth," he said in prepared comments.

It has been a slow year for private equity acquisitions, Watt said, but the energy sector has been more active.

"One of the drags in the energy space has been agreeing on price. Buyers are looking for bargain-basement deals, but the sellers aren't desperate."

The time had come for Ameriforge to seek a larger and more capable financial partner for the company to realize its potential, said Michael L. Tiner, managing director of Tanglewood and chairman of Ameriforge Group, who will continue on its board of directors.